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2025 (2) TMI 673
Dishonour of Cheque - nullification of conviction and sentence under Section 138 of the Negotiable Instruments Act by High Court based on a compromise reached between the parties after the appellate court has confirmed the conviction - HELD THAT:- It is well settled that inherent power of the Court can be exercised only when no other remedy is available to the litigants and nor a specific remedy as provided by the statute. It is also well settled that if an effective, alternative remedy is available, the High Court will not exercise its inherent power, especially when the Revision Petitioner may not have availed of that remedy. The power can be exercised by the High Court to secure the ends of justice, prevent abuse of the process of any court and to make such orders as may be necessary to give effect to any order under this Code or Act, depending upon the facts of the given case. This Court can always take note of any miscarriage of justice and prevent the same by exercising its power. These powers are neither limited, nor curtailed by any other provision of the Code or Act. However, such inherent powers are to be exercised sparingly and with caution.
In the instant case, it is true that the appeal was dismissed and the conviction and sentence was upheld by the appellate court, but it cannot be lost sight of the fact that this Court has power to intervene in exercise of its power only with a view to do the substantial justice or to avoid a miscarriage and the spirit of compromise arrived at between the parties. This is perfectly justified and legal too.
In the case of Krishan Vs. Krishnaveni, [1997 (1) TMI 529 - SUPREME COURT], Hon'ble the Apex Court has held that though the inherent power of the High Court is very wide, yet the same must be exercised sparingly and cautiously particularly in a case where the applicant is shown to have already invoked the revisional jurisdiction under section 397 of the Code. Only in cases where the High Court finds that there has been failure of justice or misuse of judicial mechanism or procedure, sentence or order was not correct, the High Court may in its discretion prevent the abuse of process or miscarriage of justice by exercising its power.
Merely because the litigation has reached to a revisional stage or that even beyond that stage, the nature and character of the offence would not change automatically and it would be wrong to hold that at revisional stage, the nature of offence punishable under Section 138 of the N.I. Act should be treated as if the same is falling under table-II of Section 320 IPC.
In the instant case, the problem herein is with the tendency of litigants to belatedly choose compounding as a means to resolve their dispute, furthermore, the arguments on behalf of the Govt. Advocate (crl.side) on the fact that unlike Section 320 Cr.P.C., Section 147 of the Negotiable Instruments Act provides no explicit guidance as to what stage compounding can or cannot be done and whether compounding can be done at the instance of the complainant or with the leave of the court.
Conclusion - Taking into account the fact that the parties have settled the dispute amicably by way of compromise, this Court is of the view that the compounding of the offence as required to be permitted.
The present Criminal Revision Case is disposed of in terms of Memorandum of Compromise arrived at between the parties to this litigation out of Court.
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2025 (2) TMI 616
Maintainability of writ petition under Article 226 of the Constitution of India - Muthoot Finance Ltd. to be considered as State or not - alleged breached statutory rules and regulations framed by the Reserve Bank of India (RBI) - whether the company could be considered a "State" or an entity performing public functions under Article 12 of the Constitution? - HELD THAT:- In the case of LIC of India v. Escorts Ltd. [1985 (12) TMI 289 - SUPREME COURT], it was contended before this Court that the Life Insurance Corporation was an instrumentality of the State and was debarred by Article 14 from acting arbitrarily. It was also contended that it was obligatory upon the Corporation to disclose the reasons for its action complained of, namely, its requisition to call an extra-ordinary general meeting of the company for the purpose of moving a Resolution to remove some Directors and appoint others in their place. Such argument was opposed by the State, contending that the actions of the State or an instrumentality of the State, which do not properly belong to the field of public law but belong to the field of private law, were not subject to judicial review.
A body, public or private, should not be categorized as “amenable” or “not amenable” to writ jurisdiction. The most important and vital consideration should be the “function” test as regards the maintainability of a writ application. If a public duty or public function is involved, any body, public or private, concerned or connection with that duty or function, and limited to that, would be subject to judicial scrutiny under the extraordinary writ jurisdiction of Article 226 of the Constitution of India.
Conclusion - i) A writ petition under Article 226 is maintainable against entities performing public functions or duties, not merely due to regulatory compliance. ii) The distinction between public law and private law is crucial in determining the maintainability of writ applications. iii) The function test is essential in assessing whether an entity is performing a public duty.
The petitions are dismissed.
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2025 (2) TMI 587
Acceptance of bid and subsequently encashing the bank guarantee - typographical error - valid agreement or not - Section 20 of the Indian Contract Act, 1872 - whether BRO was justified in accepting the bid of Rs.1,569, and on the failure of the Appellant to execute the agreement asking for forfeiture vide encashment of bank guarantee of Rs.15,04,64,000? - HELD THAT:- A mistake may be unilateral or mutual, but it is always unintentional. If it is intentional, it ceases to be a mistake. Mistakes or errors, though avoidable, are committed inadvertently. They have varied consequences in law. As per Section 20 of the Indian Contract Act, 1872 whereby both parties to an agreement are under a mistake as to matter of fact essential to an agreement, the agreement is void. The explanation to Section 20 says that an erroneous opinion as to the value of the thing which forms the subject matter of an agreement is not deemed to be a mistake as a matter of fact. This will not be a case covered by Section 20 of the Contract Act. However, this is not the first time that this question has arisen either before this Court or Courts outside of India.
In West Bengal State Electricity Board [2001 (1) TMI 921 - SUPREME COURT], the private party, the bidder did not succeed for several reasons, including the factum that the error was not obvious and self-evident. Further, the correction of such mistakes after one and a half months after the opening of the bids would have violated the express clauses relating to the computation of the bid amount. Thus, waiver of the rule or conditions in favour of the one bidder would have created unjustifiable doubts in the minds of others impairing the rule of transparency and fairness and providing room for manipulation for awarding contracts.
The Appellant was at fault and had made the mistake, of having failed to add the required zeros in the financial bid. The plea of a system glitch should not be accepted, as others had successfully uploaded their bids without a problem - BRO justified encashing the bank guarantee by citing delays caused by issuing a second notice inviting bids. This claim is baseless, as BRO was aware of the Rs.1,569/- error. Instead of declaring the bid non est due to the clear mistake, BRO asked the appellant to justify the bid, cancelled the notice, declared the Appellant a defaulter, invoked the bank guarantee, and issued a fresh notice inviting bids.
BRO’s claim that the delay was entirely due to the Appellant’s mistake is flawed, ignoring BRO’s own lapses. Mistakes, including by authorities, should be resolved through corrective steps. A practical approach could have avoided the delay, which was caused by BRO’s refusal to acknowledge the Appellant’s genuine error and the unwarranted cancellation of the bid - the Appellant is directed to pay Rs.1 crore to BRO, as a consequence of their error. Upon receiving this payment, BRO shall return the Appellant’s original bank guarantee or demand draft of Rs.15.04 crores within one week.
Conclusion - M/s ABCI was at fault for the mistake but criticized BRO for not acknowledging the error promptly. The BRO's refusal to acknowledge the mistake and its subsequent actions caused unnecessary delays in the project.
Appeal allowed.
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2025 (2) TMI 586
Liquidated damages for delay in delivery of the plant and machinery - Section 74 of the Indian Contract Act, 1872 - HELD THAT:- The High Court rightly rejected the appellant's contention that the claim for damages of Rs.107.54 has been concluded against the respondent. The High Court rightly observed that if that were so, this Court would not have confirmed the order of remand to the Arbitral Tribunal even on the said issue.
Penalties/liquidated damages were stipulated for the delay in delivering machinery and plant, failure to give the guaranteed performance of continuous fermentation plant, failure to provide a guaranteed performance with respect to steam, and failure to give a guaranteed performance with respect to power. Even the rates of liquidated damages have been laid down - Careful perusal of the claim made before the Arbitral Tribunal by the appellant shows that the claim for the sum of Rs.107.54 lakhs was not based on clause 21 of the agreement. It is not the appellant's case that the respondent was called upon to replace the plant and machinery, and as the respondent failed to do so within a reasonable time, the appellant replaced the plant and machinery by themselves. The claim was on account of a refund of the amount spent by the appellant on the plant, as is evident from paragraph 16 of the statement of claim.
The claim was not made in terms of Clause 21 of the Agreement. The claim was not on account of the breach of warranty. What is claimed is virtually the refund of the amount spent - the appellant was not entitled to the claim of Rs.68.15 lakhs as it was claimed in the statement of claim as the refund of the amount spent by the appellant on the acquisition of plant and machinery.
Conclusion - The appellant got liquidated damages as provided in the agreement on account of breaches committed by the respondent. The claim for damages of the appellant will remain confined to what is expressly provided under the Agreement in view of Section 74 of the Contract Act. The appellant retained the plant and machinery and did not take the benefit of clause 21. Therefore, as rightly held by the High Court, the appellant was not entitled to the claim of Rs.68.15 lakhs as it was claimed in the statement of claim as the refund of the amount spent by the appellant on the acquisition of plant and machinery.
There are absolutely no error in the view taken by the High Court, and accordingly, the appeal is dismissed.
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2025 (2) TMI 414
Joint and several liability to repay debit balance in the bank account - Whether respondent no. 1, who is the husband of respondent no. 2, could have been made a party to the arbitration that was invoked by the appellant, who is a registered stock broker, and held to be jointly and severally liable for the debit balance that had accrued in the wife’s (respondent no. 2’s) account with the appellant?.
Perversity of the finding of joint and several liability - HELD THAT:- Applying the test for perversity under Section 34, it is clear that the High Court, while exercising jurisdiction under Section 37, adopted an incorrect approach. The arbitral tribunal’s findings are definitely based on evidence, as has been rightly held by the Section 34 court. The High Court, at the stage of the Section 37 appeal, took an alternative view on this finding of fact by reappreciating evidence. The arbitral tribunal’s conclusion was based on oral and documentary evidence regarding the conduct of the parties, which leads to a reasonable and possible view that there is joint and several liability. Hence, the High Court, while exercising jurisdiction under Section 37, has incorrectly held the award to be perverse.
Patent illegality - HELD THAT:- The High Court held that despite noting the need for a client’s express authorisation for adjustment of accounts, the arbitral tribunal approved an illegal transfer of the credit balance from respondent no. 1’s account to that of respondent no. 2. On going through the arbitral award, the finding of the arbitral tribunal is based on “past experience” – meaning the conduct of respondent no. 1 all along acting on behalf of respondent no. 2, joint and several liability, and the respondents’ marital relationship.
Bye-law 247A provides that a broker shall not withdraw money from a client’s account other than money required for payment on behalf of the client, for payment of debt due to the broker from the client, or money in respect of which there is a liability of the client to the broker. Once the arbitral tribunal arrived at a finding that respondent no. 1 is jointly and severally liable for the debit balance in respondent no. 2’s account, which we have upheld above, Bye-law 247A in fact permits the withdrawal of the credit balance from respondent no. 1’s account. Therefore, the adjustment of accounts on 05.03.2001 is legal and valid. Although the arbitral tribunal has held that written authorisation for such adjustment is required, we find nothing in Bye-law 247A or in the SEBI Guidelines, on which this Bye-law is based, that mandates the same.
Conclusion - The arbitral tribunal had jurisdiction over respondent no. 1, and the High Court erred in setting aside the arbitral award. The arbitral award was upheld in its entirety, holding both respondents jointly and severally liable for the debit balance in respondent no. 2's account.
Appeal allowed.
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2025 (2) TMI 413
Insurance claim - valid permit or not - absence of non-depositing of authorization fee - HELD THAT:- This Court has carefully gone through the permit which is on record and the National Permit is certainly valid up to 13.10.2017. The authorization fee was required to be paid only when the truck was moving out of State of Bihar as it was registered in the State of Bihar and the truck caught fire on account of short-circuit on 08.06.2014 in the State of Bihar itself and, therefore, the respondent company could not have repudiated the claim on such a frivolous ground. The permit in question was issued by the competent authority in Bihar and, therefore, there was no requirement of paying authorization fee when the truck was being used in the State of Bihar and as per the terms and conditions of the National Permit, authorization fee was required to be paid only when the truck was moving out of State of Bihar. Thus, in the considered opinion of this Court, the appellant was certainly entitled for the insurance claim as held by the State Commission and, therefore, the order passed by the National Commission, dated 19.08.2020, deserves to be set aside and is accordingly set aside.
Appeal allowed.
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2025 (2) TMI 412
Dishonour of cheque - death of accused during pendency of the Revisional application preferred against conviction and sentence of compensation would be abated automatically or not - compensation and fine are similar and the said amount as imposed by the Court is to be recoverable from the estate of the deceased - HELD THAT:- There is no definition of fine stipulated in the CrPC but there is a provision to allow fine while convicting the accused person in view of the Indian Penal Code. Even no compensation is defined either in CrPC or IPC.
The present proceeding is initiated under Sections 138/141 of the Negotiable Instruments Act, 1881 and whenever a person is convicted under the said sections, there is a provision to sentence of imprisonment as well as fine but, in the present case, both the Learned Courts below awarded compensation to be paid by the accused to the complainant to the tune of Rs. 12 Lakhs. Actually, compensation is granted to address the suffering caused by any loss or injury resulting from an act for which the accused has been sentenced. While it establishes criminal liability, the compensation awarded to the victim is treated similarly to what could be granted in a civil suit. As for accused herein, no fine was imposed on him; instead, he was directed to pay compensation.
In the light of the provisions contained in Sections 421 of the Code of Criminal Procedure, 1973, fine amount as imposed by the Court, is to be recovered by sale and auction of the property of the accused; whereas as per Section 431 of the Code of Criminal Procedure, 1973, even amount of compensation can be recovered as if it was a fine. In the instant case, compensation was directed to be paid by the accused persons. Therefore, as per both sections 421 and 431 of the Code of Criminal Procedure, 1973, amount is to be recovered by way of auction and sale of the property of the late accused/petitioner no. 3, namely, Goutam Gupta.
The legal heirs and representatives of the deceased did not prefer any application for substitution themselves as the petitioners in place of deceased Goutam Gupta. Therefore, the present Opposite Party No. 2 filed an application for substitution of legal heirs and representatives of the deceased Goutam Gupta. Therefore, the case of the petitioners would not abate for the death of petitioner no. 3 (since deceased), namely, Goutam Gupta as the sentence includes the compensation.
Conclusion - i) The case would not abate for the death of the petitioner. ii) The registry is directed to take necessary steps to substitute the legal heirs and representatives in the Revisional application.
Application allowed.
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2025 (2) TMI 369
Dishonour of Cheque - Suit for recovery of damages/compensation on account of defamation, mental pain, agony, harassment, tension and financial loss caused to the appellant/plaintiff due to the filing of false litigation - HELD THAT:- In the present case, there is no evidence to show that any damage or harassment was caused to the plaintiff. The learned Trial Court has observed that the amount has been granted on account of defamation and mental pain and agony; whereas there is nothing on record to show that the plaintiff was defamed. In fact, there was no evidence to show that any damage or harassment had been caused to the plaintiff. It must be remembered that the institution of a legal proceeding by the defendant against the plaintiff maliciously and without reasonable and probable cause is actionable in tort on proof of damage either to his reputation or to his property. In the present case, the petitioner/plaintiff has failed to prove any damage either to his reputation or to his property or to his person.
The learned first Appellate Court upon detailed appraisal of the evidence and pleadings on record held that the proceedings instituted by the defendant against the plaintiff upon dishonouring of the cheque were not instituted on the basis of some malice. As such, the learned first Appellate Court correctly held that there was no malicious prosecution/false and frivolous litigation instituted on the part of the defendant against the plaintiff. Mere acquittal of the plaintiff in criminal case would not imply that there was malicious prosecution by the defendant against the plaintiff. As such, no ground was made out for granting the damages.
Learned lower appellate Court found that image of the plaintiff was not lowered nor any news regarding filing of complaint under Section 138 of the Negotiable Instrument Act was ever got published by the defendant. It was in this background that the suit of the plaintiff was dismissed - no ground is made out to interfere in the judgment and decree dated 30.09.2024 passed by the learned First Appellate Court.
Conclusion - The court found no merit in the plaintiff's claims of defamation, mental pain, and financial loss due to false litigation. The lack of evidence supporting these claims led to the dismissal of the suit in the second appeal.
The present regular second appeal is hereby dismissed.
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2025 (2) TMI 311
Reduction in the forfeiture price - Direction to Appellant to deduct only 10% of the Basic Sale Price (BSP) towards cancellation of the Complainants’ Apartment - refund of balance amount with interest - unfair trade practice - HELD THAT:- This Court in the case of Satish Batra v. Sudhir Rawal [2012 (10) TMI 595 - SUPREME COURT] has held that to justify the forfeiture of advance money being part of “earnest money” the terms of the contract should be clear and explicit. It has been observed that the earnest money is paid or given at the time when the contract is entered into and, as a pledge for its due performance by the depositor to be forfeited in case of nonperformance by the depositor. However, this Court clarified that if the payment is made only towards part-payment of consideration and not intended as earnest money then the forfeiture clause will not apply.
On considering the obligations of the Developer in the event it does not comply with the timelines, a very meagre compensation is provided to the Apartment purchaser. Not only that clause 4.2 of the Agreement, which provides that the Apartment shall be ready for occupation within 42 months from the date of issuance of Allotment Letter, also provides that the Developer would be entitled for a grace period of 6 months over and above this 42 months’ period. The said clause 4.2 further provides for various eventualities in case of which the Developer would be entitled to further extension of period for handing over the possession - In any case, clause 4.3 of the Agreement provides that, subject to the provisions of clause 4.2 of the Agreement, if the Developer fails or neglects to issue the Possession Notice on or before the Tentative Completion Date and/or on such date as may be extended by mutual consent of the Parties, the Developer shall be liable to pay to the Buyer a meagre compensation for such a delay at the rate of Rs.5/- per month per square feet of the Super Built Up Area of the Apartment.
It can thus be seen that the Agreement is one-sided and totally tilted in favour of the Developer.
In the case of CENTRAL INLAND WATER TRANSPORT CORPN. LTD. VERSUS BROJO NATH GANGULY [1986 (4) TMI 271 - SUPREME COURT], this Court, by taking recourse to Article 14 of the Constitution of India, has held that the courts will not enforce an unfair and unreasonable contract or an unfair and unreasonable clause in a contract, entered into between Parties who are not equal in bargaining power.
In the case of Desh Raj and others [2022 (12) TMI 1556 - SUPREME COURT], this Court was considering an Agreement to Sell with respect to the landed property. A perusal of the judgment would reveal that it was a case of an Agreement between two equal Parties and there are no terms in the Agreement which could be said to be one-sided and tilted totally in favour of one of the Parties - the present case would not be governed by the law laid down by this Court in the case of Desh Raj and others.
It can be seen that this Court has held that if the forfeiture of earnest money under a contract is reasonable, then it does not fall within Section 74 of the Indian Contract Act, 1872, inasmuch as, such a forfeiture does not amount to imposing a penalty. It has further been held that, however, if the forfeiture is of the nature of penalty, then Section 74 would be applicable. This Court has further held that under the terms of the contract, if the party in breach undertook to pay a sum of money or to forfeit a sum of money which he had already paid to the party complaining of a breach of contract, the undertaking is of the nature of a penalty.
The NCDRC, in a series of cases right from the year 2015, has held that 10% of the BSP is a reasonable amount which is liable to be forfeited as earnest money - Though it is not inclined to interfere with the direction of the NCDRC for refund of the amount in excess of 10% of the BSP, however it is found that the NCDRC was not justified in awarding interest on the amount to be refunded.
Conclusion - i) The forfeiture clauses must be reasonable and not one-sided to be enforceable. ii) The NCDRC's reduction of the forfeiture to 10% of the BSP was upheld. iii) The award of interest on the refunded amount was overturned.
Appeal allowed in part.
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2025 (2) TMI 252
Enforceability of clause 49.5 of the General Conditions of Contract (GCC), which prohibits claims for damages due to delays caused by the respondent - appellant contended that the delay in construction work has resulted in an additional financial burden on account of the establishment and overheads, etc., for a longer period than planned, for which the appellant would be claiming separately - HELD THAT:- Clause 49.5 was waived by the respondent. In fact, the respondent stated that the claim for financial burden would have to be dealt with together with the proposal for an extension of time, and the said claim cannot be processed separately. Thereafter, on two occasions, on specific requests made by the appellant under clause 49 of the GCC, the extension of time was granted by the respondent. Except sub-clause 5 of clause 49, there is no other sub-clause which provides for grant of extension when the delay was attributable to the respondent. The extensions were granted at the instance of the appellant by invoking clause 49. Hence, the argument of waiver of Clause 49.5 by the respondent deserves to be rejected. Moreover, detailed claim, as stated in the letter dated 14th October, 2013 was not submitted by the appellant.
As far as scope of interference in an appeal under Section 37 of Arbitration Act is concerned, the law is well settled. In the case of Larsen Air Conditioning and Refrigeration Company v. Union of India and Ors. [2023 (8) TMI 985 - SUPREME COURT], this court held that 'the limited and extremely circumscribed jurisdiction of the court under Section 34 of the Act, permits the court to interfere with an award, sans the grounds of patent illegality i.e. that “illegality must go to the root of the matter and cannot be of a trivial nature”; and that the Tribunal “must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground”'
In the case of Konkan Railway Corporation Limited v. Chenab Bridge Project Undertaking [2023 (8) TMI 1227 - SUPREME COURT], this court held 'Scope of interference by a court in an appeal under Section 37 of the Act, in examining an order, setting aside or refusing to set aside an award, is restricted and subject to the same grounds as the challenge under Section 34 of the Act.'
Conclusion - The appellant's claims were found to be barred by clause 49.5, and no grounds existed for judicial interference under Sections 34 and 37 of the Arbitration Act.
Considering the limited scope of interference, as laid down by this Court, there are no merit in the appeal and the same is accordingly dismissed.
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2025 (2) TMI 251
Placement of the petitioners in the Commercial Department - Merger Rules, 2022, which merged employees from the Entertainment Tax Department into the Commercial Tax Department, violated Articles 14, 16, and 21 of the Constitution by treating these employees differently and affecting their promotion prospects? - HELD THAT:- The overriding effect has been mentioned in Rule 2 of the Merger Rules. Rule 3(3) of the Rules defines the date of ‘Substantive Appointment’ as the date of appointment at the post held on the date of Notification dated 24.04.2018. Rule 3 (4) of the Merger Rules, 2022 defines the ‘cadre’ of posts in the Commercial Tax Department and the Entertainment Tax Department. Rule 4(4) provides that promotion and other service matters of related posts shall be decided under the concerning Rules of service cadre of the Commercial Tax Department. Rule 4(5) of the Merger Rules, 2022 clarifies that the services of the merged employees shall be governed by the concerned Service Rules governing the cadre. Rule 4(7) of the Merger Rules, 2022 plays a pivotal role in preserving and protecting the continuity of services of the petitioners. Hence their date of merger is being treated as the date of appointment in the related service cadre of Commercial Tax Department to maintain the continuity of service.
It is clear that till framing of Merger Rules, 2022 the petitioners have no grievance as they continued to enjoy the service benefits as per the Uttar Pradesh Entertainment and Betting Tax (Gazetted) Service Rules, 1992. On account of Merger Rules, 2022, when they have been placed at the bottom of the seniority list in the respective cadres of the Commercial Tax Department as on 24.04.2018, they raised their grievance by means of the aforesaid writ petitions stating that the action taken by the State Government is hit by Article 14 of the Constitution of India.
The only grievance raised before this Court is that the placement of the petitioners in the Commercial Department has caused prejudice. In this regard, reliance placed by the learned counsel for the respondents on INDIAN AIRLINES OFFICERS VERSUS INDIAN AIRLINES LTD. & ORS [2007 (7) TMI 660 - SUPREME COURT] is fully applicable as it has been held that the whole scheme cannot be said to be arbitrary/discriminatory merely because some employees suffer in terms of promotion/seniority and ultimately their chances of promotion are affected.
There is no violation of Articles 14, 16 & 21 of the Constitution of India and since nothing in the Merger Rules, 2022 violates the aforesaid Articles, the prayer made by the petitioners in both the writ petitions for declaring it ultra vires has no substance and the same has no force in law as the matter pertains to policy decision taken by the State Government.
Conclusion - The Merger Rules, 2022, were not ultra vires the Constitution. The policy decisions are not subject to judicial interference unless they are manifestly arbitrary or violate specific constitutional provisions. The petitioners' substantive appointment and status be treated as of the date specified in the Merger Rules, 2022.
Petition dismissed.
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2025 (2) TMI 250
Dishonour of cheque - vicarious liability of Managing Director of M/s. Kwality Limited u/s 138 of the Negotiable Instruments Act, 1881 - the cheque dishonored, was not drawn by him or the company he represents but was handed over by him to the complainant - HELD THAT:- The petitioner is being sought to made an accused on account of being the Managing director of M/s. Kwality Limited, the borrower of the subject loan. It is not in doubt that when the principal offender under Section 138 of the NI Act is a company, then every person who is in charge of the affairs of the company, at such time when the subject cheque is dishonoured would be liable. However, it is evident from a perusal of the record that the petitioner is a Managing Director of M/s. Kwality Limited, admittedly, the borrower of the loan.
The subject cheque was admittedly issued by DRTPL, and signed by Makardhwaj Kumar, director of DRTPL. The only role attributed to the petitioner in the instant case is that the petitioner had handed over the cheque admittedly issued by DRTPL to the complainant. However, merely because the subject cheque was handed over by the petitioner, the same does not shift the onus from the drawer in terms of Section 138 of the NI Act.
From a plain reading of Section 138 of the NI Act, it materialises that liability is imputed on the person who draws the cheque on an account maintained by them. In the present case, even though the cheque was handed over by the petitioner who is the director of M/s. Kwality Limited, the same was not drawn by the M/s. Kwality Limited. The subject cheque was duly executed and issued by DRTPL. Considering that the petitioner is not the director of the accused company who is the drawer of the subject cheque, he cannot be made liable for the offence under Section 138 of the NI Act.
Conclusion - The petitioner, as the Managing Director of M/s. Kwality Limited, cannot be held liable under Section 138 of the NI Act for the dishonored cheque issued by DRTPL.
Petition allowed.
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2025 (2) TMI 207
Modification of penalty imposed by the Board of Discipline (BoD) under Section 21A of the Chartered Accountants Act, 1949 - appellant guilty of ‘other misconduct’ as envisaged under Clause (2) of Part IV of the First Schedule to the Act - dishonor of cheques issued by the appellant constitutes 'other misconduct' under the Act or not - HELD THAT:- The appellant had raised substantial grounds before the Appellate Authority to assail the findings of the BoD, which grounds he appears to have not pursued at the time of hearing before the Appellate Authority, where he had appeared in person. No doubt, the order passed by the Appellate Authority on 17.07.2012, records that the appellant had not assailed the findings of the guilt on merits, but taking into account that the appellant had soon thereafter, preferred a review petition seeking rehearing of appeal on merits, which request was rejected by the Appellate Authority on the ground of maintainability, looking at the cascading effect which the findings of guilt against him are likely to have on his professional career, the appellant deserves to be granted an opportunity to be heard on merits on his challenge to the findings of the BoD holding him guilty of “other misconduct” under the Act.
The question, whether dishonour of cheques issued by a Chartered Account would fall within the ambit of the term “other misconduct” as envisaged as under the Act would have to be examined on a case to case basis by taking into account the facts and circumstances of each case - Reference may be made to the following observations of the Apex Court in Institute of Chartered Accountants of India v. H.S. Ghia [2004 (8) TMI 782 - BOMBAY HIGH COURT] where it was held that 'the word "misconduct" though not capable of precise definition, on reflection receives its connotation from the context, the delinquency in its performance and its effect on the discipline and the nature of the duty. It may involve moral turpitude, it must be improper or wrong behaviour; unlawful behaviour, wilful in character; forbidden act, a transgression of established and definite rule of action or code of conduct but not mere error of judgment, carelessness or negligence in performance of the duty; the act complained of bears forbidden quality or character.'
Thus, it is evident that the dishonor of the cheques issued by the appellant had to be considered in the light of his explanation that though he had taken a loan from respondent no.4, he had already returned the loan amount to him in cash.
The findings of BoD regarding the appellant being guilty of “other misconduct” prima facie appears to have been arrived at without properly appreciating the context in which the cheques issued by the appellant were dishonoured. Having said so, it is opined that instead of this Court examining the appellant’s challenge to the BoD’s order dated 22.11.2011 on merits, it would be appropriate that the matter is remanded back to the Appellate Authority for reconsideration of his appeal on merits.
Conclusion - i) Procedural fairness requires that appellants be given a fair opportunity to challenge findings of misconduct on merits, especially when such findings have significant professional implications. ii) Instead of this Court examining the appellant’s challenge to the BoD’s order dated 22.11.2011 on merits, it would be appropriate that the matter is remanded back to the Appellate Authority for reconsideration of his appeal on merits.
Matter remanded back to the Appellate Authority for reconsideration of the appellant’s original appeal alongwith the supplementary appeal, for which purpose the appellant is being granted four weeks time - appeal allowed by way of remand.
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2025 (2) TMI 177
Modification of Award - Order regarding the amount of 50,00,000 deposited with the Registrar, High Court of Judicature at Madras - HELD THAT:- This Court will first hear arguments of the counsel seeking reconsideration of the ratio expressed in PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E AND 220 NATIONAL HIGHWAYS AUTHORITY OF INDIA VERSUS M. HAKEEM & ANR. [2021 (7) TMI 1343 - SUPREME COURT] that is, the Court has the power to modify an award under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996. Thereafter, this Court will hear the counsel who support the view that the Court does not have the power to modify an Award under Sections 34 and 37 of the 1996 Act.
While examining the aforesaid question, the Court will also examine the contours and scope of the power of the Court under Sections 34 and 37 of the 1996 Act and if the power of modification exists, to what extent the same can be exercised. The question of severability will also be addressed and examined.
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2025 (2) TMI 176
Interpretation of statute - analysis of the precise definition of the word “forthwith” as used in section 50 of the Code of Criminal Procedure Code, 1973 - scope of the legal obligation it imposes on the State to supply the ‘grounds of arrest’ to an arrestee.
HELD THAT:- The requirement of serving upon an arrestee the ‘grounds of arrest’ (or grounds for arrest as it is alternatively phrased) as distinct from citing the ‘reasons for arrest’ for seeking remand has gained much significance in light of the recent decisions of the Supreme Court. In its verdict in Prabir Purkayastha [2024 (5) TMI 1104 - SUPREME COURT], the Supreme Court has drawn a clear distinction between the ‘grounds of arrest’ and ‘reasons for arrest’, observing 'the grounds of arrest informed in writing must convey to the arrested accused all basic facts on which he was being arrested so as to provide him an opportunity of defending himself against custodial remand and to seek bail. Thus, the “grounds of arrest” would invariably be personal to the accused and cannot be equated with the “reasons of arrest” which are general in nature.'
An I.O. can therefore no longer treat the matter of serving the grounds of arrest upon an arrestee with any levity. It is in this context that this court has carefully analysed the submissions made on behalf of the petitioner and the State in the present case; and the following position has emerged from the analysis - The phrase “grounds for such arrest” appears both in section 50 Cr.P.C. as well as in section 19 of the PMLA. However, there is a significant difference between the words that precede the phrase “grounds for such arrest” in the said two provisions.
Without addressing the controversy as to whether the petitioner stood deprived of his liberty once he reached the police station at 11:30 a.m. on 17.05.2024, there can be no contest that the petitioner was formally arrested when the arrest memo was issued to him i.e., at 06:30 p.m. on 17.05.2024. In compliance of section 50 of the Cr.P.C., as interpreted above, the I.O. was required to serve the grounds of arrest upon the petitioner simultaneously with the issuance of the arrest memo. This was admittedly not done - the arrest of the petitioner is vitiated for non-compliance with the mandate of section 50 of the Cr.P.C. and Article 22 (1) of the Constitution.
Conclusion - i) The term "forthwith" in Section 50 Cr.P.C. requires immediate and simultaneous communication of arrest grounds at the time of arrest. This interpretation is essential to uphold the constitutional right against arbitrary deprivation of liberty. ii) The petitioner's arrest was unlawful due to non-compliance with the requirement to communicate the grounds of arrest "forthwith.
Petition allowed.
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2025 (2) TMI 137
Dishonour of Cheque - seeking leave to appeal against separate orders of acquittal - discharge of legally enforceable debt or not - rebuttal of statutory presumption under Sections 118 and 139 of the Negotiable Instruments Act - HELD THAT:- Under Section 118 of the Act, once the signature on the cheque is admitted, the presumption is that the cheque was drawn for consideration. In tandem, Section 139 reinforces the presumption by holding that the holder of the cheque is deemed to have received it in discharge, whether wholly or partially, of a debt or liability. These provisions collectively create an inference of a legally enforceable liability, thereby shifting the evidentiary burden to the accused to rebut the presumption. However, as has been consistently held by the Supreme Court, the standard for such a probable defence is that it need only be established on a preponderance of probabilities, and it is not incumbent upon the accused to conclusively prove the non-existence of the debt or liability.
In the present case, the Respondents have not denied signing the cheques in question, however, they have established a probable defence by demolishing the case of the Petitioner that there was a liability of INR 1.10 Crores payable by the Respondents. Accordingly, since no liability was established for the principal amount, any alleged obligation to pay profit or interest on the purported investment also stood negated. The Respondents have, by their own evidence and through the effective cross-examination of the Petitioner’s witness, succeeded in rebutting the statutory presumptions under Sections 118 and 139 of the NI Act.
The Court examined the statement of accounts purportedly furnished by the Respondents. During cross-examination, the sole witness (CW-1) conceded that this statement did not bear the name of the Respondents’ company, nor did it include the company’s stamp or the signature of any of its directors. The Court, thus, rightly observed that these documents appeared to be mere, vague, and unsubstantiated computer-generated Excel sheets, falling short of the mandatory standards prescribed under Section 34 of the Indian Evidence Act, 1872 - the Trial Court rightly held that the statement of accounts and the other materials placed on record by the Petitioner failed to discharge the shifted burden of proof regarding the existence of the alleged investment or loan.
Conclusion - i) The Respondents have rebutted the statutory presumption on the basis of preponderance of probability that the Petitioner does not have a legally enforceable debt due from the Respondents. The Trial Court rightly held that the burden of proof to establish such a liability shifts on the Petitioner, which burden they were not able to discharge. ii) Once it is established that no legally enforceable debt was payable by the Respondents to the Petitioner firm, any claim for returns or interest on such a debt becomes untenable. iii) This Court finds no reason to interfere with the impugned order of the Trial Court, acquitting the Respondents under Section 138 of the NI Act.
Petition dismissed.
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2025 (2) TMI 136
Maintainability of petition - availability of alternative remedy - Dishonour of Cheque - challenge to conviction of Revision Petitioner/accused under section 138 of Negotiable Instruments Act and sentence passed - compromise arrived at between the parties - compounding of offences - Whether the order passed by the Appellate Court confirming the conviction of the trial court under section 138 of Negotiable Instruments Act can be nullified by the High Court on the basis of compromise entered between the parties? - HELD THAT:- It is well settled that inherent power of the Court can be exercised only when no other remedy is available to the litigants and nor a specific remedy as provided by the statute. It is also well settled that if an effective, alternative remedy is available, the High Court will not exercise its inherent power, especially when the Revision Petitioner may not have availed of that remedy. The power can be exercised by the High Court to secure the ends of justice, prevent abuse of the process of any court and to make such orders as may be necessary to give effect to any order under this Code or Act, depending upon the facts of the given case - These powers are neither limited, nor curtailed by any other provision of the Code or Act. However, such inherent powers are to be exercised sparingly and with caution.
In the instant case, the Revision Petitioner is invoking the inherent power of this court after dismissal of the appeal confirming his conviction and sentence. In these circumstances, it is required to examine as to whether for entertaining the aforesaid case, any special circumstances are made out or not, so it can be legitimately argued and inferred and held that in all cases where the Revision Petitioner is able to satisfy this Court that there are special circumstances which can be clearly spelt out subsequent proceeding invoking inherent power of this court can be modified and cannot be thrown away on that technical argument as to its sustainability once the contesting parties entered into subsequent compromise.
In the case of Krishan Vs. Krishnaveni [1997 (1) TMI 529 - SUPREME COURT], Hon'ble the Apex Court has held that though the inherent power of the High Court is very wide, yet the same must be exercised sparingly and cautiously particularly in a case where the applicant is shown to have already invoked the revisional jurisdiction under section 397 of the Code. Only in cases where the High Court finds that there has been failure of justice or misuse of judicial mechanism or procedure, sentence or order was not correct, the High Court may in its discretion prevent the abuse of process or miscarriage of justice by exercising its power.
In the case of S.W. Palankattkar & others Vs. State of Bihar [2001 (10) TMI 1150 - SUPREME COURT], it has been held by the Hon'ble Apex Court that quashing of the criminal proceedings is an exception than a rule. The inherent powers of the High Court itself envisages three circumstances under which the inherent jurisdiction may be exercised:-(i) to give effect an order under the Code, (ii) to prevent abuse of the process of the court ; (iii) to otherwise secure the ends of justice. The power of High Court is very wide but should be exercised very cautiously to do real and substantial justice for which the court alone exists.
Section 147 of NI Act begins with a non obstante clause and such clause is being used in a provision to communicate that the provision shall prevail despite anything to the contrary in any other or different legal provisions. So, in light of the compass provided, a dispute in the nature of complaint under section 138 of N.I. Act, can be settled by way of compromise irrespective of any other legislation including Cr.P.C. In general and section 320 (1)(2) or (6) of the Cr.P.C. in particular. The scheme of section 320 Cr.P.C. deals mainly with procedural aspects; but it simultaneously crystallizes certain enforceable rights and obligation. Hence, this provision has an element of substantive legislation and therefore, it can be said that the scheme of section 320 does not lay down only procedure; but still, the status of the scheme remains under a general law of procedure and as per the accepted proposition of law, the special law would prevail over general law.
In the instant case, the problem herein is with the tendency of litigants to belatedly choose compounding as a means to resolve their dispute, furthermore, the arguments on behalf of the Govt. Advocate (crl.side) on the fact that unlike Section 320 Cr.P.C., Section 147 of the Negotiable Instruments Act provides no explicit guidance as to what stage compounding can or cannot be done and whether compounding can be done at the instance of the complainant or with the leave of the court.
Conclusion - Taking into account the fact that the parties have settled the dispute amicably by way of compromise, this Court is of the view that the compounding of the offence as required to be permitted. The conviction and sentence imposed by the lower courts annulled, treating the revision petitioner as acquitted due to the compounding of the offense.
The trial court is directed to refund Rs.35,000/- already deposited by the Revision Petitioner in C.C.No.315 of 2018 along with accrued interest, if any, within a period of four weeks from the date of receipt of a certified copy of this order along with appropriate application before the trial court - The Criminal Revision Case is disposed of.
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2025 (2) TMI 135
Dishonour of Cheque - conviction of the petitioners for the offence under Section 138 of the Negotiable Instruments Act - discharge of the liability of the first accused Firm - compromise arrived between the parties - compounding of offences - HELD THAT:- The petitioners and respondent are present in person and confirm the compromise arrived at between them. In support of the same, today, both the learned counsel for petitioners as well as respondent had filed a Memorandum of Criminal Miscellaneous Petition under Section 147 of the Negotiable Instruments Act, 1881 for compounding the offence, as per the settlement entered between the petitioners and the respondent, which have been signed by the petitioners and the respondent and also by their respective counsel.
Conclusion - In view of the compromise arrived at between the parties and considering the petition under Section 147 of the Negotiable Instruments Act, the offence under Section 138 of the Negotiable Instruments Act is compounded.
The conviction and sentence imposed upon the petitioners confirming the judgment is set aside and the revision petitioners are acquitted of the offence under Section 138 of the Negotiable Instruments Act - Criminal Revision Case is allowed.
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2025 (2) TMI 72
Challenge to Arbitral Award - reduction in the compensation awarded by the Motor Accidents Claims Tribunal to the appellants for the death of their parents in a motor vehicle accident - assessment of income of the deceased parents - HELD THAT:- The Court finds that the Award rendered by the Tribunal is well-considered. Though the claimed compensation was Rs.1,00,00,000/- each with regard to the father and the mother, the Tribunal granted Rs. 58,24,000/- re the father and Rs.93,61,000/- the mother. The documents produced by the appellants and the reasoning given by the Tribunal as well as the Karnataka High Court’s Division Bench judgment in B Parimala [2000 (7) TMI 1016 - KARNATAKA HIGH COURT] indicate, and, rightly so, that merely because the appellants stepped into the shoes of the deceased, by such factum itself, the appellants would not be capable of running the Mill. It would be of relevance as to whether due to their lack of experience and maturity, real/expected downfall in the profitability of the firm or the business would ensue. Such factor, while considering a claim pertaining to loss of future income/earnings, would have to be dealt with.
In the present cases, even the monthly incomes of the parents as claimed by the appellants i.e.. income of the father being Rs.25,00,000/- per year and the mother’s being Rs.20,00,000/- per year, the notional income fixed by the Tribunal of Rs.60,000/- each per month, is much more reasonable. It is no longer res integra that Income Tax Returns are reliable evidence to assess the income of a deceased, reference whereof can be made to Amrit Bhanu Shali v National Insurance Co. Ltd. [2012 (4) TMI 839 - SUPREME COURT]; KALPANARAJ AND ORS. VERSUS TAMIL NADU STATE TRANSPORT CORPN. [2014 (4) TMI 1332 - SUPREME COURT], and K. RAMYA AND ORS. VERSUS NATIONAL INSURANCE CO. LTD. AND ORS. [2022 (9) TMI 1654 - SUPREME COURT].
It is satisfying that between the formula applied by the Tribunal vis-a-vis the approach adopted by the High Court, the view of the Tribunal rendered in the form of the Award satisfies judicial conscience. The High Court’s reasoning militates against settled law - the Impugned Judgment of the High Court deserves to be interfered with.
Appeal disposed off.
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2025 (1) TMI 1535
Challenge to conviction and the sentence of death imposed on the Appellant by the Court of Sessions for Greater Bombay - admissibility and reliability of electronic evidence, specifically CCTV footage, without a Section 65-B(4) certificate - circumstantial evidence - failure of prosecution to follow the mandate Under Section 65-B of the Indian Evidence Act, and the failure to produce the Section 65-B(4) certificate - HELD THAT:- In Shafhi Mohammad v. The State of Himachal Pradesh [2018 (1) TMI 1402 - SUPREME COURT], a two Judge Bench of this Court after noticing Anvar P.V. [2014 (9) TMI 1007 - SUPREME COURT] held that a party who is not in possession of device from which the document is produced cannot be required to produce the certificate Under Section 65-B(4) of the Indian Evidence Act. It also held that applicability of requirement of certificate being procedural can be relaxed by the Court wherever interest of justice so justifies.
A court of law in this scenario cannot be technical about the manner of objections that are raised. Even though objection has not been raised specifically when the CCTV footage was exhibited by PW- 1, when PW-38 was in the witness box a specific question was put to him and subsequent to evidence, he deposed that he was aware of the necessity of furnishing 65-B certificate while collecting electronic evidence. On the facts of the present case, we are inclined to treat it as an objection taken at the earliest point in time. Thus, when the prosecution was aware of the need for the 65-B(4) certificate and they themselves collected it for the CDRs there was no reason as to why they did not collect the same for the CCTV footage - no reliance can be placed on the CCTV footage, insofar as an attempt is made by the prosecution to attribute that the Appellant and the deceased EA were last seen together based on the CCTV footage.
There are gaping holes in the prosecution story leading to the irresistible conclusion that there is something more than what meets the eye in this case. While the old adage, witness may lie but not the circumstances, may be correct, however, the circumstances adduced, as held by this Court, should be fully established. There is a legal distinction between 'may be proved' and 'must be or should be proved' as held by this Court. The circumstances relied upon when stitched together do not lead to the sole hypothesis of the guilt of the Accused and it is not found that the chain is so complete as not to leave any reasonable ground for the conclusion consistent with the innocence of the Accused.
On the available evidence, it is opined that it will be extremely unsafe to sustain a conviction against the Appellant. The prosecution has not established its case beyond reasonable doubt. Hence, it is constrained to come to the sole irresistible conclusion that the Appellant is not guilty of the offences for which he has been charged.
Conclusion - The prosecution failed to establish the Appellant's guilt beyond a reasonable doubt, primarily due to the inadequacies in the circumstantial evidence presented. There is a necessity of a Section 65-B(4) certificate for the admissibility of electronic evidence.
The Court acquitted the Appellant, setting aside the High Court's judgment and the death sentence, due to the prosecution's failure to meet the required legal standards - Appeal allowed.
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